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Solving the harder side of the budget equation

  • Author: Anchorage Daily News editorial board
    | Opinion
  • Updated: March 30, 2019
  • Published March 30, 2019

Gov. Mike Dunleavy answers a question during a roadshow with Americans for Prosperity in 49th State Brewing Company on Tuesday, March 26, 2019. (Bill Roth / ADN)

In a series of appearances across the state, Gov. Mike Dunleavy has presented a clearer message to pitch his proposed budget, which would cut $1.6 billion in state spending and drastically reduce funds for state services such as K-12 education, Medicaid and the University of Alaska. Spending more money hasn’t led to better outcomes, the governor has said, suggesting that Alaska should focus more on performance and outcomes than the dollar amounts allocated to the state’s departments.

He’s correct that dramatic state budget increases during the past 14 years haven’t equated to improved outcomes in the state’s largest institutions. In fiscal 2005, Alaska spent $3.4 billion in state funds for its operating and capital budgets. At the height of oil prices in fiscal 2013, that state spending had ballooned to $8.9 billion. As of the current fiscal year, it stands at $6.4 billion, well off its peak but still much higher than in the early 2000s.

Despite the increased spending, our school system ranks near the bottom of U.S. states in nationwide metrics. Crime rates remain stubbornly high, and despite a growing national economy, we remain mired in a recession. Whatever your opinion of the governor’s plan, it’s hard to make the case that the free-spending habits of the past 15 years led to great strides forward for Alaska.

It’s safe to say that all of us want to see the state spend its money wisely, and all of us want a better bang for our buck.

But there’s a big piece of the puzzle left largely unaddressed by the governor so far: If we are to achieve those better outcomes, how will we do it — and how will we do so with resources substantially reduced from their current levels?

Gov. Dunleavy is right that blindly spending money without demanding better results is unwise. But figuring out how to make those improvements, especially while spending less to obtain them, is harder than the math problem of making expenditures and revenue jibe. And so far, there has been little detail offered on the governor’s vision to achieve those outcomes under the budget he unveiled Feb. 13.

Scarce resources can drive creativity and motivation. But simply handing the university a $134 million cut — a 41 percent reduction in state funding — and telling students, staff and faculty members that he is “agnostic” about how the cuts are applied isn’t outcome-driven leadership; it’s telling someone else to fix a substantial portion of the problem Alaskans elected Gov. Dunleavy to deal with.

Similarly, with the governor’s cuts to K-12 education, the implicit message is that municipalities will have to either contribute a far greater share of school costs or make peace with crowded classrooms and curtailed curriculum offerings.

The governor has signaled that a bill dealing specifically with education is pending. Municipalities and school districts are no doubt hoping it will provide more clarity with regard to a vision for getting from Point A — lagging test scores and high per-student spending — to Point B — improved outcomes at reduced cost.

Gov. Dunleavy may be most successful at implementing his budget agenda when it comes to Medicaid, as it’s the area where his administration has the most direct control over spending. Perhaps not coincidentally, it’s also the area in which his approach has been fleshed out the most so far, with rate reductions for services and rollbacks of optional coverage such as adult dental care. The governor’s plan as expressed publicly is to make cuts that can be absorbed by the state’s larger hospitals, while attempting to limit impacts on smaller clinics and rural health centers, which have less financial flexibility. If this approach can save the state money without affecting the availability and quality of the care, it can be counted as a win — but that’s a big if in a vitally important service and sector of Alaska’s economy. Administration members say they are in active negotiations with the federal Centers for Medicare and Medicaid Services, proposing structural changes to Alaska’s Medicaid system that will meet the goal of improving outcomes and reducing costs. We should be hopeful those negotiations are successful, but also remember that there’s no such thing as a free lunch — or a free CAT scan, as the case may be.

The governor is right when he says we should pay more attention to the outcomes of our state services. But leadership is needed to chart a course from where we are now to those better outcomes, and if Gov. Dunleavy believes they can and should be achieved with less revenue, he must quickly explain how. That’s the harder side of the state budget equation, and it’s the part we need to figure out as soon as we can.